Has Intel's Indian-American Techie Risked America's Global Technology Leadership?

Intel has recently fired its Indian-American chief engineer Venkata Murthy Renduchintala, who also served as Group President of the Technology, Systems Architecture and Client Group (TSCG), for failure to deliver 7 nanometer semiconductor technology on schedule, according to Reuters.  The news has knocked the market value of Intel by tens of billions dollars. The American company, the biggest global chip manufacturer with in-house fabrication plants, has also decided to outsource manufacturing. This could deal a serious blow to America's global leadership in chip manufacturing which is fundamental to all other computer and communications related technologies.

Intel's Global Leadership:

Intel Corp. (INTC), founded in 1968 in Silicon Valley, is the world's largest and the most advanced semiconductor company, larger than the second-ranked Samsung Semiconductors, and more than triple the size of the next-largest domestic producer, Qualcomm Inc. (QCOM).

What distinguishes Intel from most other semiconductor companies is that it manufactures its products in-house. The bulk of semiconductor “manufacturers” outsource the actual work of building their products out to foundries in China and Taiwan.

Last week, the company revealed that its smaller, faster 7-nanometer chipmaking technology was at least six months behind schedule and it would have to outsource manufacturing to keep its products competitive.

Taiwan Semiconductor Manufacturing Company (TSMC):

Taiwan-based TSMC has 6 nanometer technology in production already. There is widespread speculation that Intel will turn to it to manufacture its most advanced microprocessors.

TSMC manufactures chips for the vast majority of the leading fabless semiconductor companies including Advanced Micro Devices (AMD), Apple Inc., Broadcom Inc., Marvell, Nvidia, and Qualcomm.

US Technology Leadership Under Threat:

Semiconductor manufacturing technology is fundamental to all other computer and communications technologies. While the U.S. still has most of the leading chip design companies, there are very few leading semiconductor manufacturing facilities in the country. In fact, the US, which invented the chip technology,  has slipped from being first in semiconductor manufacturing at the dawn of the industry to fifth in the world.

Recognizing the issue of foreign sourcing of critical technologies, the US has forced TSMC to start a fab in Arizona.  But TSMC’s proposed fab in Arizona will have relatively small capacity, sufficient to meet only a fraction of the manufacturing demand of top companies like Apple, AMD, Marvell, Nvidia, etc.  The US Congress is in the process of legislation that will provide greater incentives to companies to manufacture chips in the United States.

US-China Tech War:


TSMC is caught in the cross-fire of US-China technology war.  Almost all major semiconductor manufacturers, including TSMC, rely on equipment made by US companies. The US government is attempting to leverage the dominance of US chipmaking equipment industry to shut out the Chinese technology companies.

US Commerce Department has recently announced that henceforth, any semiconductor chips made with equipment built by American companies cannot be sold to Huawei without prior approval and license from the DOC.

Summary:

Silicon Valley tech giant has revealed that its smaller, faster 7-nanometer chipmaking technology is at least six months behind schedule and it would have to outsource manufacturing to keep its products competitive. The company has blamed the failure on its Indian-American chief engineer who has since been fired. What is at stake here is the US technology leadership because semiconductors are fundamental to all computers and communications products. Taiwan-based TSMC appears to be the biggest beneficiary of Intel's failure.

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Comment by Riaz Haq on August 2, 2020 at 11:42am

Nikkei reported earlier today that TSMC has moved to stop new orders from Huawei following the US government’s announcement last week. The rules are specifically designed to target Huawei and its chip subsidiary HiSilicon, requiring a license for any shipments from manufacturers that use US technology or equipment. TSMC didn’t deny the reports but called them “purely market rumor,” according to Reuters.


https://www.theverge.com/2020/5/18/21262042/huawei-us-export-tsmc-c...


Huawei has in the past suggested that it could switch its chip supply to Samsung in this eventuality. The company has also recently been exploring domestic chip production through China’s Semiconductor Manufacturing International Corporation (SMIC), which just received a $2.2 billion investment from the Chinese government.

SMIC is a relatively tiny competitor to TSMC, however, and it would take a long time to scale up to Huawei’s cutting-edge demands. Last week SMIC started mass production of HiSilicon’s Kirin 710A processor on its 14nm node, but TSMC is expected to move onto a more advanced 5nm process this year. Even the original Kirin 710 was manufactured by TSMC at 12nm, and that was a mid-range chip in 2018.

“This decision by the US government does not just affect Huawei. It will have a serious impact on a wide number of global industries,” Huawei says in its statement. “In the long run, this will damage the trust and collaboration within the global semiconductor industry which many industries depend on, increasing conflict and loss within these industries. The US is leveraging its own technological strengths to crush companies outside its own borders. This will only serve to undermine the trust international companies place in US technology and supply chains. Ultimately, this will harm US interests.”

Richard Yu, CEO of Huawei’s consumer division, also spoke out against the US government today. “The so-called cybersecurity reasons are merely an excuse,” he wrote in a WeChat post reported on by Bloomberg. “The key is the threat to the technology hegemony of the US.”

Comment by Riaz Haq on August 2, 2020 at 11:43am

Nikkei reported earlier today that TSMC has moved to stop new orders from Huawei following the US government’s announcement last week. The rules are specifically designed to target Huawei and its chip subsidiary HiSilicon, requiring a license for any shipments from manufacturers that use US technology or equipment. TSMC didn’t deny the reports but called them “purely market rumor,” according to Reuters.


https://www.theverge.com/2020/5/18/21262042/huawei-us-export-tsmc-c...


Huawei has in the past suggested that it could switch its chip supply to Samsung in this eventuality. The company has also recently been exploring domestic chip production through China’s Semiconductor Manufacturing International Corporation (SMIC), which just received a $2.2 billion investment from the Chinese government.

SMIC is a relatively tiny competitor to TSMC, however, and it would take a long time to scale up to Huawei’s cutting-edge demands. Last week SMIC started mass production of HiSilicon’s Kirin 710A processor on its 14nm node, but TSMC is expected to move onto a more advanced 5nm process this year. Even the original Kirin 710 was manufactured by TSMC at 12nm, and that was a mid-range chip in 2018.

“This decision by the US government does not just affect Huawei. It will have a serious impact on a wide number of global industries,” Huawei says in its statement. “In the long run, this will damage the trust and collaboration within the global semiconductor industry which many industries depend on, increasing conflict and loss within these industries. The US is leveraging its own technological strengths to crush companies outside its own borders. This will only serve to undermine the trust international companies place in US technology and supply chains. Ultimately, this will harm US interests.”

Richard Yu, CEO of Huawei’s consumer division, also spoke out against the US government today. “The so-called cybersecurity reasons are merely an excuse,” he wrote in a WeChat post reported on by Bloomberg. “The key is the threat to the technology hegemony of the US.”

Comment by Riaz Haq on August 9, 2020 at 7:38am

#US squeeze on #China’s apps, #digital infrastructure could upend global internet. Over 20 of 100 top-grossing apps on #Google Play are #Chinese, while 10 of the 100 highest grossing apps on #Apple’s App Store are from China. #CleanNetwork https://www.scmp.com/tech/big-tech/article/3096323/us-squeeze-china... via @scmpnews

“Many of the Chinese companies currently under unilateral US sanctions are innocent, and their technology and products are safe,” said Wang Wenbin, China’s Foreign Ministry spokesman, in a statement on Thursday. “It is absurd for the US to talk of a ‘Clean Network’ when it is covered in its own filth”, referencing the Edward Snowden incident and Prism surveillance.

--------
The Trump administration’s “Clean Network” programme threatens to further disrupt China’s technology industry, as the campaign seeks to restrict the international expansion of Chinese apps, cloud services and undersea cable networks.
US Secretary of State Mike Pompeo on Wednesday made sweeping remarks that – “to keep Americans’ data safe from untrusted vendors” – he will aim to remove Chinese-owned apps in the market as well as cut off links with China’s digital infrastructure.
The initiative, which the State Department said includes the commitment of more than 30 countries and territories, is likely to escalate the complex tech war between the world’s two largest economies, according to analysts.
“The negative effect of this programme is that it’s becoming harder to see a truly global vision of the internet and access without borders surviving this tech war,” said Paul Haswell, a partner who advises technology companies at international law firm Pinsent Masons. “It would seem that the object of the campaign is to remove Chinese technology from all aspects of US data transmission and processes. We’ll have to see if that is even possible in practice.”

-----------

“This latest ramp-up in US-China tensions poses a potential barrier for the Chinese cloud companies to expand globally,” said Mathew Ball, Canalys’ chief analyst for global infrastructure, cloud and cybersecurity. He added, however, that this campaign “will be challenging to enforce outside the US”.
Pompeo said the US campaign is also focused on keeping the undersea cables that links the country to the global internet safe from intelligence-gathering by China.
In June, the US government blocked a major undersea cable network from linking Hong Kong to the US West Coast because it “would expose US communications traffic to collection” by China.

Comment by Riaz Haq on August 9, 2020 at 7:38am

#US #CleanNetwork aims to restrict #international growth of #Chinese apps, cloud services and undersea cable networks. 20+ of 100 top-grossing apps on #Google Play are #Chinese, while 10 of the 100 highest grossing apps on #Apple’s App Store are from China https://www.scmp.com/tech/big-tech/article/3096323/us-squeeze-china...

The Clean Network campaign also aims to prevent sensitive personal information of US citizens and businesses’ most valuable intellectual property – including Covid-19 vaccine research – from being stored and processed on cloud computing platforms run by the likes of

Alibaba Group Holding
, telecommunications network operators

China Mobile
and

China Telecom
,

Baidu
and Tencent.

Tencent and Alibaba, the parent company of the South China Morning Post, declined to comment on the US programme on Thursday. Baidu did not immediately reply to a request for comment.

Alibaba Cloud
was the world’s fourth-largest cloud services provider in the second quarter, behind Amazon Web Services, Microsoft Azure and Google Cloud, according to research firm Canalys.
“This latest ramp-up in US-China tensions poses a potential barrier for the Chinese cloud companies to expand globally,” said Mathew Ball, Canalys’ chief analyst for global infrastructure, cloud and cybersecurity. He added, however, that this campaign “will be challenging to enforce outside the US”.

Comment by Riaz Haq on January 14, 2021 at 4:06pm

Lack of #Computer Chips Disrupts #Automobile Factories Worldwide. #Semiconductor chips are used in touch screens, engine controls & transmissions, communications, suspensions, anti-lock brakes & collision avoidance systems with cameras and other sensors https://www.nytimes.com/2021/01/13/business/auto-factories-semicond...

Geopolitics also played a role. The Trump administration in September placed restrictions on Semiconductor Manufacturing International Corporation, China’s main foundry, which produces chips for cars and many other applications. The company’s customers began looking for alternatives, generating additional competition for chip supplies from other foundries, said Gaurav Gupta, a vice president at the research firm Gartner.

------

The chip crisis is an example of how the pandemic has shaken the global economy in unpredictable ways. Carmakers expected to face supply chain shortages, and plants closed early in 2020 because of fear that workers would infect one another, or because trucking firms had stopped delivering. Most U.S. auto factories ceased production for roughly two months last spring.

Automakers braced for turmoil when the pandemic hit. They expected supply chain disruptions and plummeting sales. But they never figured that a year later one of their biggest problems would be PlayStations.

Strong demand for gaming systems, personal computers and other electronics by a world stuck indoors has sucked up supplies of semiconductors, forcing carmakers around the world to scramble for the chips that have become as essential to mobility as gasoline or steel.

Virtually no carmaker has been spared. Toyota Motor has shut down production lines in China. Fiat Chrysler Automobiles temporarily stopped production at plants in Ontario and Mexico. Volkswagen has warned of production problems at factories in China, Europe and the United States. Ford Motor said last week that it was idling a Louisville, Ky., factory for a week because of the shortage.

When Covid-19 hit, automakers slashed orders for chips in anticipation of plunging sales. At the same time, semiconductor makers shifted their production lines to meet surging orders for chips used in products like laptop computers, webcams, tablets and 5G smartphones.

-----------

Businesses also upgraded their digital infrastructure to handle online meetings and employees working from home, while telecommunications companies invested in broadband infrastructure, further fueling demand for semiconductors.

Then auto sales bounced back faster than expected at the end of 2020, catching everyone off guard. The shortages of chips that ensued are expected to last well into 2021, because it can take semiconductor makers six to nine months to realign production.

“Consumer electronics exploded,” said Dan Hearsch, a managing director at the consulting firm AlixPartners. “Everybody and their brother wanted to buy an Xbox and PlayStation and laptops, while automotive shut down. Then automotive came back faster than expected, and that’s where you get into this problem.”

While the shortage is not expected to cause auto prices to rise very much, buyers might have to wait longer to get the vehicles they want.

The chip shortage has its roots in long-term forces reshaping the auto and semiconductor industries, as well as short-term confusion from the pandemic.

-------------


“Future investment in these foundries will therefore be critical so that the automotive industry can avoid such supply chain upheavals in the future,” Continental said in a statement.

Infineon, based in Munich, said it was stepping up investment in new production capacity in 2021 to as much as 1.5 billion euros, or $1.8 billion, from €1.1 billion in 2020. The company is also ramping up production at a new chip factory in Villach, Austria, that will produce 12-inch wafers.

Comment by Riaz Haq on February 25, 2021 at 5:38pm

#Superpower status will depend on #semiconductor chips. #TSMC building world's largest $20 billion fab in #Taiwan to manufacture chips at dimensions of just 3 nanometers that'll power everything from latest iPhones to medical equipment to F-35 fighters. https://www.ft.com/content/44e28cad-55b7-4995-a5c5-6de6f9733747


This vast capital expenditure highlights the near-insatiable demand for computer chips, the dominance of Taiwanese chipmakers and the sophistication of modern manufacturing. TSMC’s chips power everything from Apple’s latest iPhones to medical equipment to F-35 warplanes, accounting for about 55 per cent of global semiconductor sales.

But the manufacture of semiconductors is becoming a geopolitical imperative, too. As part of its squeeze on China’s tech industry, the US has pressured TSMC to stop supplying Huawei, previously one of its biggest customers. China, which spends more on importing computer chips than oil, is developing a semiconductor industry to reduce dependence on overseas suppliers. 

Sensing their own vulnerability, the US, Japan and the EU are also stepping up their efforts to develop indigenous semiconductor industries, as their carmakers and computer games companies wail about the lack of supply. Computer chips currently vie with vaccines as must-have resources for any nation state.

If military capability in previous centuries was built on breech-loading rifles, warships or atomic bombs, it may well depend in the 21st century on the smartest use of advanced chips. The centrality of TSMC to the global semiconductor industry is sometimes given as a reason why mainland China might yet invade Taiwan. But far bigger military and political considerations will determine Beijing’s course of action.

By any measure, TSMC is an extraordinary company which is reaping the benefits of out-investing its rivals. It has just announced that its capital spending will further increase to between $25bn and $28bn this year as it struggles to add capacity fast enough to match demand. During an earnings call last month, CC Wei, TSMC’s chief executive, said that surging sales of smartphones and high-performance computers and the adoption of 5G mobile technology were fuelling demand for the company’s leading-edge logic chips. “We believe that 5G is a multiyear megatrend that will enable a world where digital computation is increasingly ubiquitous,” he said.

Most other semiconductor companies have dropped out of the race to manufacture 3nm chips due to the stratospheric costs. It will now be hard for any rival to catch up with TSMC because of its vast capital spending, its technological expertise, its network of suppliers and its support from the Taiwanese government. Only Samsung of South Korea is visible in its rear-view mirror.

“What separates TSMC from other foundries is its appetite to take risks and its ability to execute. It is an incredible business model,” says Brett Simpson, a tech analyst at Arete, an independent research firm. “The market is heading for one dominant player and one subscale player that is hanging in there and executing very well.”

The bigger concern for TSMC is the geopolitical tension between the US and China. With two fabrication plants in China, one in the US state of Washington and another planned in Arizona, TSMC has been hedging its bets. But like many other companies in a fast-polarising world, it is being forced to choose.

Shelley Rigger, a professor at Davidson College in North Carolina and author of Why Taiwan Matters, says that US pressure on China is only reinforcing Beijing’s determination to become self-sufficient in semiconductor manufacturing: “China has infinite money to throw at a problem like this and no scruples about doing what needs to be done.”

Taiwan has long feared that the world could divide into Chinese-dominated red supply chains and US-focused blue supply chains, jeopardising relations with either its biggest trading partner or its main strategic ally. The island’s room for manoeuvre is becoming as thin as TSMC’s wafers.

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